FADE IN:
Act One
THE CRASH
EXT. NANTUCKET ISLAND — AUTUMN — 1971
A weathered saltbox house overlooking Nantucket Harbor. THOMAS PHELPS (69), silver-haired and sharp-eyed, sits at a typewriter on his porch. Stacks of ledgers and financial records surround him. He types slowly, deliberately. Each word earned over fifty years.
Phelps (V.O.)
(narrating as he types)
I have spent my life looking for the answer to one question: How does a man turn a modest investment into a fortune? Not through luck. Not through timing. But through understanding a truth so simple that almost nobody believes it.
He pauses. Types five words. Underlines them.
BUY RIGHT AND HOLD ON
CUT TO:
INT. ROCHESTER POST AND RECORD — 1919
Rochester, Minnesota. A cramped newsroom. YOUNG THOMAS PHELPS (17) — barely old enough to shave — sits at the city desk. He is the city editor. Seventeen years old and already running a newsroom.
Rochester, Minnesota — 1919. Thomas William Phelps, age 17, city editor.
Reporter
Kid, I've got twenty years on you. Why are you giving me assignments?
Young Phelps
(without looking up)
Because I can write faster than you, think clearer than you, and I don't waste time asking questions I already know the answers to. Now go get me the story on the grain prices.
Phelps (elder) (breaking the fourth wall)
I learned two things early. First: the fact without the truth is false. Always connect. Second: you can be young or experienced, but you cannot be both. I was young. So I had to be fast.
INT. WALL STREET JOURNAL — WASHINGTON BUREAU — 1929
Phelps (27), now chief of the Journal's Washington bureau, watches the ticker tape with growing dread. The market is in freefall. October 1929. Black Tuesday.
October 29, 1929 — Black Tuesday. The Dow loses 12% in a single day.
Colleague
Tom, Southern Railroad dropped from $160 to $8. Eight dollars! That's the annual dividend at that price. It can't go lower.
Young Phelps
(reaching for the phone)
Buy me 500 shares. On margin.
INT. PHELPS'S APARTMENT — MONTHS LATER
Phelps sits at his kitchen table, staring at a margin call notice. Southern Railroad: $2.50 per share. He's wiped out. Everything gone.
Rosalie
(quietly)
How much did we lose?
Young Phelps
Everything. I bought at eight because I thought it couldn't go lower. It went to two-fifty. I was right about the value. I was wrong about the timing. And the margin killed us.
Phelps (elder) (breaking the fourth wall)
Good judgment comes from experience. And experience comes from bad judgment. That $2.50 lesson cost me everything I had. But it taught me something worth infinitely more: the difference between being right and being right at the right time. And the lethal danger of leverage when you're early.
Act Two
THE EDUCATION
INT. BARRON'S OFFICES — NEW YORK — 1936
Phelps (34), now editor of Barron's National Financial Weekly. He sits at the helm of one of the most prestigious publications in American finance. Through his window: the canyons of Wall Street, still scarred by the Depression.
Phelps
(to a young reporter)
Never listen to opinions unless you're also given insight into the assumptions behind them. Who is talking often means more than what is said. People whose self-interest is diametrically opposed to your own are trying to persuade you to act. Every single day.
INT. FRANCIS I. DU PONT & COMPANY — 1945
Post-war Wall Street. Phelps (43) has crossed from journalism to finance, now a partner and economist at one of the major brokerages. He studies the companies that survived the Depression and are now booming. A pattern emerges.
Phelps
(at a partners' meeting)
Gentlemen, I've been tracking something. The companies that made their shareholders the most money over the last fifteen years — Abbott Labs, Deere, IBM — they share one characteristic. They reinvest their earnings at substantially above-average rates of return. They don't pay it all out in dividends. They compound it.
Senior Partner
Tom, our clients want dividends. They want income.
Phelps
And the clients who took the dividends now have income. But the ones who held the shares of companies that reinvested at 15, 20, 25 percent — they have fortunes.
IN THE STOCK MARKET AS IN POKER, THE MONEY TENDS TO MOVE FROM STUPID TO INTELLIGENT HANDS
INT. SCUDDER, STEVENS & CLARK — 1962
Phelps (60), now a partner at one of America's oldest and most respected investment counsel firms. He's begun his study — methodically cataloging every stock that returned 100 times its purchase price since 1932. His office walls are covered in charts.
Junior Analyst
Mr. Phelps, I found another one. Xerox. Bought in 1950 at the equivalent of six cents a share, adjusted for splits. Worth over $100 today. That's over 1,500 to one.
Phelps
And how many of Xerox's original shareholders still hold the stock?
Junior Analyst
(checking his notes)
Almost none, sir. Most sold in the 1950s. Some in the early 1960s. Very few held past the first ten-bagger.
Phelps
(nodding slowly)
There it is. That's the whole secret. Finding a stock that goes up 100 to 1 is rare but not impossible. I've found 365 of them in forty years. But holding one for the full ride? That requires a quality of mind quite out of the ordinary.
Phelps (breaking the fourth wall)
To make money in stocks, you need three things: the vision to see them, the courage to buy them, and the patience to hold them. Patience is the rarest of the three. I spent my entire career watching brilliant people find the right stock, buy it at the right price, and then sell it a hundred times too soon.
Act Three
THE MASTERWORK
INT. PHELPS'S STUDY — NANTUCKET — 1971
Retired now. Phelps sits surrounded by decades of research. 365 stocks. Every one returned at least 100 times its purchase price between 1932 and 1971. IBM, Disney, Merck, 3M, American Express. The evidence is overwhelming.
Phelps
(typing, dictating to himself)
The reason more people don't make ten thousand percent on their money is that they don't set their goals high enough. When looking for the biggest game... never, ever... shoot at anything small.
He pulls out a chart of IBM. Computing-Tabulating-Recording Company, bought for $21,700 in 1921. Now worth $150 million.
Phelps
Someone sold those shares for $21,700 because they needed the money. Or they were scared. Or their broker told them to take the profit. And they missed $150 million. Not because they were stupid. But because they couldn't wait.
THE BIG MONEY IS NOT IN THE BUYING AND THE SELLING, BUT IN THE WAITING
Phelps
(writing the book's key passage)
It is almost a truism that nothing kills a money-making opportunity faster than its widespread popularity. The good stocks seldom have friends. Bull market highs are made when the outlook for still higher prices is most broadly convincing. And bear market lows are made when the likelihood of still lower prices seems overwhelming.
He types the final section. On the ethics of investing.
Phelps
Ask yourself if the company you plan to invest in is going to make the world a better place. If no, avoid it like the plague. Bet on individuals and organizations fired by the zeal to meet human wants and needs. Not just the ones that are there for the profit.
INT. MCGRAW-HILL OFFICES — NEW YORK — 1972
An editor holds the manuscript: "100 to 1 in the Stock Market: A Distinguished Security Analyst Tells How to Make More of Your Investment Opportunities."
Editor
Mr. Phelps, I have to be honest. This book tells people to buy stocks and then do nothing. For decades. Our readers want trading strategies. They want action.
Phelps
(with a gentle smile)
And that, my friend, is precisely why they'll never make a hundred to one.
Epilogue
THE LEGACY
INT. INVESTMENT CONFERENCE — 2011
Forty years later. CHUCK AKRE, a legendary investor, takes the stage. Behind him, a slide: "The Investor's Odyssey."
Chuck Akre
There's a book most of you have never read. Written in 1972 by a man named Thomas Phelps. It's called "100 to 1 in the Stock Market." And it changed everything I know about investing.
In the audience, CHRIS MAYER (40s) leans forward, scribbling notes.
INT. CHRIS MAYER'S OFFICE — 2014
Mayer sits surrounded by his own research. He's found 365 stocks from 1962 to 2014 that returned 100 to one — the same count as Phelps. He opens Phelps's book to the dedication page.
Chris Mayer
(to himself)
He was right about everything. The compounding. The patience. The management quality. If I had to pick the two most important factors? A high return on capital plus the ability to reinvest at similarly high rates. Exactly what Phelps said fifty years ago.
EXT. OLD NORTH CEMETERY — NANTUCKET — PRESENT DAY
A simple headstone. Thomas William Phelps. 1902-1992. Nearby, the harbor where he spent his final twenty years in quiet contemplation. A copy of his book rests against the stone, left by a visitor. Its spine cracked from rereading.
Thomas W. Phelps died on November 4, 1992, at age 90. His book, "100 to 1 in the Stock Market," went out of print and became a collector's item. Copies sold for hundreds of dollars. It has since been reprinted and continues to inspire a global movement of patient, long-term investors who believe that the big money is not in the buying and the selling — but in the waiting.
FADE TO BLACK.
"To make money in stocks, you need to have vision to see them, courage to buy them and patience to hold them. Patience is the rarest of the three." — Thomas W. Phelps